Calculating vacancy costs: the formula

Vacancy cost is what an unfilled position costs for as long as it stays unfilled. The common calculation is simple: days of vacancy × the daily value contribution of the role. As a lower bound for that contribution, the salary of the role is used – anyone paying for a position expects at least that much value back.

This calculation is deliberately conservative. In practice, actual vacancy costs run at two to four times direct personnel costs, because overtime, decision backlogs, lost productivity and forgone revenue come on top. And a second rule of thumb says: after roughly 120 days of vacancy, the cost of a position exceeds a full annual gross salary.

At a median advert runtime of 106 days for skilled positions in German mechanical engineering (VDMA), that point is not the exception. It is the norm.

The calculation step by step

Take a field service technician at 3,369 euros gross per month – the average for service technicians in the field.

Step 5 is the honest part. The €11,800 is the figure you can defend against any scrutiny. The real amount sits above it – but cannot be stated to the euro, which is why we work with the lower bound.

What is missing from this calculation – and costs more in service

The salary calculation treats every role alike. In machinery, plant engineering and technical field service that is defensible for production and wrong for service.

According to Deloitte, service typically delivers 30 percent of total profit, and 50 percent or more on maintenance-intensive equipment. Service quality decides 50 percent of the customer’s investment decision – as much as product quality and price combined.

Four cost types follow that appear in no standard formula:

• Contractual response times. They sit in the contract, not at your discretion. Breach them and you risk discounts or cancellation.
• Maintenance contracts not signed. The most expensive item and the most invisible: it shows up nowhere as a cost, only as sales growing more slowly than they could.
• Spare parts and retrofit revenue. It depends on presence. Rarely on site means not seeing the need.
• The next machine. If service quality decides half the investment decision, an overloaded service team is a sales risk.

The comparison it comes down to

Two things stand out. First: the vacancy is usually more expensive than the hire – filling fast beats filling cheaply. Second: every alternative is a recurring item, while building your own system is one-off.

How to make the number defensible in your own house

1. Use the real salary of the role, not the industry median. The median is orientation, not a figure for your company.
2. Measure your real vacancy duration – from the day of approval to the first day at work, not to the signature.
3. Add parallel vacancies together. Three roles open for four months costs more than one open for twelve, because the remaining team is loaded simultaneously.
4. Calculate the service contribution margin separately if you have it. Revenue per service technician times margin is the more honest lower bound than salary.
5. Present it as a model calculation. A figure presented as certainty loses its force in the first critical conversation.

The purpose of this calculation is not to produce a large number. It is to shift the discussion: away from “what does hiring cost” towards “what does waiting cost”. In most companies that changes the order of decisions.

Why the role stays open in the first place is in “Finding field service technicians”.